China crucial for Australian economy- Swan
March 13, 2013, 9:51 am

Wayne Swan, Australia’s deputy prime minister believes the Chinese economy is on the right trajectory to growth.[Getty Images]

Australia’s deputy prime minister says the country is providing active support for the internationalisation of the Renminbi (RMB), China’s official currency.

Wayne Swan, Australia’s deputy prime minister and treasurer announced on Tuesday that Australia is expected to host the inaugural Australia-Hong Kong RMB trade and investment dialogue next month.

He was speaking at the Australian China Business Council (ACBC)’s Canberra Networking Day.

“The deepening relationship between China and Australia will continue to be one of the defining features of Australia’s economic story in the Asian century,” the minister said.

Australia, Swan said, believes the Chinese economy to be on the right trajectory to growth.

Swan said RMB-denominated trade settlement reached almost 3 trillion RMB in 2012, up 42 per cent in just one year.

In addition, the latest data shows the value of RMB payments more broadly increasing by a massive 171 per cent since January last year.

He also said that the Australian Treasury and the Reserve Bank of Australia have been working closely with the People’s Bank of China to set up direct trading between the RMB and the Australian dollar (AUS).

“There’s a significant opportunity here…” Swan said, “Tapping into this is just one of the policy pathways of the Asian Century White Paper that the government is working on.”

Swan pointed out that China is now 40 per cent larger than it was in 2008.

“So its growth rate can be 20 per cent lower – say 8 per cent now versus 10 per cent back then – for China to make the same contribution to global growth.”

The minister said he believes that China’s economic growth has stabilised.

“There’s no doubt we had two big risks in the global economy in 2012, but China was not one of them. Rolling crises in Europe and the United States dogged the global recovery last year and they are still the biggest risks on the horizon,” he said.

Swan urged China to address its big structural challenges like the huge amount of unregulated lending in its financial system and its transition to more consumption-led growth.

“It was encouraging to hear outgoing Premier Wen (Jiabao) say just a week ago that China’s continued reform and re-balancing towards domestic consumption would be critical for China’s future.”

Swan urged Australian businesses to “harness the opportunities on our doorstep.”

The minister also announced that Australia will redirect 6.5 million AUS ($6.63 million) to improve the Treasury ‘s engagement with the Asian region.

57 founding members, many of them prominent US allies, will sign into creation the China-led Asian Infrastructure Investment Bank on Monday, the first major global financial instrument independent from the Bretton Woods system.

Representatives of the countries will meet in Beijing on Monday to sign an agreement of the bank, the Chinese Foreign Ministry said on Thursday. All the five BRICS countries are also joining the new infrastructure investment bank.

The agreement on the $100 billion AIIB will then have to be ratified by the parliaments of the founding members, Chinese Foreign Ministry spokesman Lu Kang said at a daily press briefing in Beijing.

The AIIB is also the first major multilateral development bank in a generation that provides an avenue for China to strengthen its presence in the world’s fastest-growing region.